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Can eBay’s new regime tackle its credibility gap?

This week saw new eBay CEO John Donahoe taking the helm and ushering in a new era at the online auctioning behemoth.

So how will eBay’s approach change under its new management? Will it become less community focused? And can the new team remove hurdles that have prevented many big brands from investing in eBay sales programmes?

We’ve been pretty vocal at ChannelAdvisor since around 2004, when eBay really started to slow down, that we feel there are three things that should be fixed at eBay. I call them the three ‘F’s – fees, feedback and fraud.

I think they have really tackled fees and have made some good work there. We’re really big fans of back-end loading the fees and making them more performance oriented.

If you look at eBay as a whole, let’s say they have a 12% take rate. Before Donahoe’s regime, it was 7% of listings fees and 5% of final value. This latest change for most sellers on average has switched that around. I would like to see him take that two or three more steps.

With feedback, some of the things they are working on are OK but there are several more cycles they could work on.

The one I am probably most disappointed on is fraud. I think there is a kind of institutional denial about the fraud problem on eBay. We have some data from a survey where buyers are asked why they are deactivating on eBay. The number one reason is shipping and handling costs and the number two is feedback.The number three is safety issues.

Whenever I talk to Joe Public fraud is the number one reason by far. I think they need to do a lot more to admit there is a problem and they need to address it.

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Where do you see eBay going in the future? Donahoe is reportedly in favour of a move towards the fixed price model, rather than auctions. Where are its sales going to come from?

It’s hard to tell because if you look back 18 months, it has gone through cycles. One of the last things Bill Cobb did was say that auctions were going to be their core focus and revitalise them. Now Donahoe has come in and is concentrating on fixed price as the growth engine.

I think we will end up with a kind of hybrid where there will be a lot of different ways to buy on eBay and the way we buy will be driven by what the seller is doing. If you have a one of a kind product, an auction makes sense. A lot will be driven by the buyers’ preferences as well.

It’s tough though. I worry that if eBay has too many choices, buyers will be confused. There has to be balancing point and I don’t think they have figured out what that looks like.

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Do you think the way eBay is perceived by its community is going to change significantly with the new management?

It’s hard to predict how eBay is going to change with the switchover to the new world. They are definitely more business-oriented people and you are starting to feel that within the ecosystem.

eBay Live will be interesting this year because it is kind of like taking the CEO of a Fortune 100 company and getting him to run a circus. It will be interesting to see Donahoe up on the stage at eBay Live. It is kind of like a circus situation at eBay Live and it will be interesting to see how he handles it. It feels like a round hole square peg kind of situation.

I think it will be more businesslike and there will be elements of community on eBay, but it will not be as soft and fun as it has been. But eBay has vast numbers of people in the community team and I don’t see them going away.

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How many of your larger clients are withdrawing from eBay, either because they have grown big enough to just use it for disposal, or because for them, it is no longer as attractive a marketplace to deal in?

I wouldn’t use the word withdrawing. It’s a question of what their focus is. eBay is the focus for a very small percentage of our customers now, because once they get that kind of multi-channel addiction it can kind of take over.

eBay will always be in the mix but it can flip from what I call the channel of first resort to the channel of last resort. A good case study would be a seller that gets to $100,000 a month in sales on eBay. They will keep that $100,000 on eBay and layer in their website, Amazon and other channels.

Now they will be doing $1m a month. What eBay has to ask itself is could it have been a part of that other $900,000 a month that has been created?

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What should eBay be doing to attract larger brands?

What’s historically been tough has not been getting big brands going but the policies eBay has.

One simple one is that on eBay you have to put your credit card details on file. If you’re a director at Motorola, you’re not authorised to do that. That can become a six month fiasco at a large company, while for a Mom and Pop seller it is a very simple decision.

There are any number of problems. We have had numerous situations where eBay will nuke large sellers because it triggers fraud filters when they put a million dollars of products on there. These things have added up to a bad selling experience on eBay.

The only time it tends to work is when you have a group focused on it. They can set expectations. You pull in the brand but keep it separate enough to fly under the corporate radar. That team can be entrepreneurial enough to get round some of the issues that can come up.

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In the UK, it has just become compulsory for sellers to offer Paypal as a payment method on all listings. Should it do the same thing in the US?

I think there are ways to stand behind transactions without limiting seller options. I would like to see something that kept seller flexibility on different payment schemes but still backed up the transactions. That’s do-able within a more open framework.

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When you become successful on eBay, or Amazon, how can you combat the fact that other sellers will rush in to compete with you?

It’s harder and harder to build your own defensible area in online. If you go on eBay and are successful there will be someone who competes with you. It’s the same on Amazon. Sometimes Amazon competes with you.

We have seen several people take different approaches to this. One is to stay in the long tail so you sell a wide selection of items, but not very deeply. Auto parts is a great example of that.

The other we have seen being highly effective is we have a telescope seller that built up a very nice telescope brand on eBay. Then they went to China and sourced their own branded telescope and added some things that they thought would be unique.

They integrated the supply chain so that they have their own brand at the product level. That is another way to carve out that niche.

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Are sellers on eBay becoming better at customer retention?

We are definitely seeing that. There is a seller maturity cycle and an inflexion point where a retailer that has started on eBay gets more multi-channel, and starts to realise that their existing customers are their cheapest customers.

Usually what happens is around email marketing and promotions for existing customers. It kind of kicks in when the seller is a $7m to $10m seller, although it can be earlier or later. They start to monetise their existing buyer base.

We have some customers that do a very clever job at that. One is a golf seller called Rock Bottom Golf. They call all their buyers 'Rockheads' and have Rockhead-only specials. They have created a social network around the idea of satisfying their customers.

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Is there any way eBay sellers’ approaches differ between the US and UK?

I would say the US guys are more experimental. Any month, they will be testing ten different things – two seller Ids with different shipping and handling costs, or creating a group on Facebook and experimenting with it.

We tend to be a more experimental bunch. The UK tend to be more – I don’t want to say conservative, but less experimental and more heads down and putting their effort into one thing.

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